Problema company will issue new 25-year debt with a par, Ask an Expert

Accounting

Problem:

A company will issue new 25-year debt with a par value of $1,000 and a coupon rate of 8%, paid annually. The tax rate is 40%.

Requirement:

Question: If the flotation cost is 3% of the issue proceeds, then what is the after-tax cost of debt? Disregard the tax shield from the amortization of flotation costs.

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Accounting Basics, Accounting

Category:- Accounting Basics
Reference No.:- M91172970

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